Business Economics

Running head: BUSINESS ECONOMICS
Business Economics
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1BUSINESS ECONOMICS
Table of Contents
Part 1:.........................................................................................................................................2
1.1:..........................................................................................................................................2
1.2:..........................................................................................................................................4
1.3:..........................................................................................................................................5
Part 2:.........................................................................................................................................7
2.1:..........................................................................................................................................7
2.2:..........................................................................................................................................8
2.3:........................................................................................................................................10
Part 3:.......................................................................................................................................11
3.1:........................................................................................................................................11
3.2:........................................................................................................................................11
3.3:........................................................................................................................................12
Reference:................................................................................................................................13

2BUSINESS ECONOMICS
Demand
P0
P1
Price
Quantity demandedQ1 Q0
Part 1:
1.1:
Demand for Bitcoin comes from collective want of consumers and the law of quantity
demand supports this concept. According to law of demand, price and quantity demanded for
any product follows an opposite relationship for which the demand curve also slopes
downward (Blundell et al. 2015). The term ‘quantity demanded’ means any particular amount
of good that buyers can intend and able to buy at a certain price. For Bitcoin, this economic
concept is applicable as well. Few years ago, price of a single Bitcoin was around USD 1200
and consequently fewer amounts of people intended to purchase this cryptocurrency.
However, in 2015, value of each Bitcoin has decreased and become around USD 225, which
in turn has led the demand for Bitcoin to increase further (Ciaian, Rajcaniova and Kancs
2016). Other factors that can influence this demand except its own price are number of
buyers, preferences and their income along with their expectations and advertisements. At
present, Bitcoin is not classified under either a normal good or an inferior one.
Figure 1: Demand curve

3BUSINESS ECONOMICS
Supply
ly
P0
P1
Price
O
Quantity suppliedQ0 Q1
Source: (created by author)
Figure 1 represents downward slopping demand curve for Bitcoin. From this figure it
can be said that when price remains at P0, demand for this currency remains at Q0 level.
When price per unit of Bitcoin increases and becomes P1, its quantity demanded becomes Q1
amount, which is comparatively lower than Q0 amount.
Supply of Bitcoin, on the other side, refers to the suppliers’ collective ability to
produce Bitcoin and this comes from the block chain, which is a series of calculations.
Several computers solve those calculations and they are called Bitcoin miners. Bitcoin
suppliers also follow the law of supply indicating that price and quantity supplied have
positive relationship with each other. Hence, the supply curve is an upward slopping curve.
However, the supplier or algorithm is going to restrict the supply of Bitcoin in 2140 after
reaching to its optimum level of 2.1 million (Ciaian and Rajcaniova 2018).
Figure 2: Supply curve